SaaS vendors face risks of data loss or service disruptions. Escrow agreements provide a safety net, ensuring continuity for subscribers. Benefits for vendors include building trust, gaining a competitive edge, and streamlining negotiations. Upon agreement, materials are deposited securely, with release triggered by events like bankruptcy or breaches. EscrowTech offers tailored solutions.

By design, SaaS subscribers do not have access to a running copy of the mission-critical software that keeps their business afloat. While this comes with many benefits, from enhanced efficiency to increased scalability, SaaS subscribers do face some risks. In the face of an adverse event on the SaaS vendor’s side, they can lose access to customer data. They might even lose access to essential services necessary for the continuation of business. 

It’s clear that subscribers have many reasons to pursue a SaaS escrow agreement. It’s essentially a disaster recovery plan that ensures business continuity in the event of an unexpected software issue. The agreement functions as an insurance policy that can preserve customer data and help subscribers maintain their preferred workflow.  

But how does technology escrow help SaaS software vendors? Continue reading to learn the basics of entering into an escrow agreement as a SaaS vendor.

How do SaaS Escrow Agreements Benefit Vendors?

The primary purpose of SaaS escrow agreements is to protect customers. Even so, they have several benefits for SaaS vendors as well. We’ll explore these below.

Build Subscriber Trust and Retention

Consenting to enter an escrow agreement inspires trust and confidence in your subscribers and stakeholders. Your willingness to enter an agreement provides assurance that using your application is a safe and secure choice. Most importantly, subscribers will feel like you have the best interests of their business at heart. A SaaS escrow agreement proves you’re invested in their success and continuity.  

Likewise, your proactive commitment to addressing customers’ concerns is likely to increase customer retention. It’s a small, cost-effective step you can take to create a long-term positive relationship with growing businesses.

Furthermore, subscribers who have fears about vendor lock-in will be grateful to have options in the event that they need to switch providers. As a result, you can anticipate less churn overall.

Gain a Competitive Advantage

Subscribers have many options when it comes to choosing appropriate SaaS applications for their businesses. Your confidence in your product and your own business continuity can often set you apart in a competitive market. It’s an excellent way to earn the trust of risk-averse businesses. Ultimately, you will build a positive reputation in your target market.  

Pairing an escrow agreement with a SaaS vendor security assessment immediately demonstrates attention to detail, investment in stakeholders, and commitment to positive customer service. 

Streamline Your Negotiations

If you work in a highly regulated industry (or with subscribers who do), having a pre-defined escrow agreement can expedite the negotiation process. You won’t need a custom agreement with each individual SaaS subscriber, saving you both time and money.  

Be sure to work with a trustworthy escrow agency capable of crafting an agreement customized to your SaaS application. If you do your due diligence, it can be an investment in efficiency.  

As a result, potential subscribers will have fewer questions to ask SaaS vendors. You will come across as thoughtful, intuitive, and invested in your subscribers’ success. 

Two parties meet to arrange a SaaS Escrow agreement

What Happens When a SaaS Vendor Enters into an Escrow Agreement?

Upon entering into an escrow agreement, the SaaS vendor will become part of a three-party arrangement. The other parties involved are the customer and a neutral third-party escrow agent. 

In many cases, you will get to choose between several packages. However, the top escrow agencies can customize a package to meet the unique needs of your application. We advise you to be wary of any “one-size-fits-all” approach, especially in regulated industries.  

Once you have entered into the agreement, you can expect the following:

  • SaaS vendors deposit escrow materials: You will deposit agreed-upon materials into a secure escrow account. This typically includes source code, documentation, and deployment scripts. It may or may not include subscriber data or any third-party dependencies. Depending on your package, you may deliver them by hand, use a secure online portal, or utilize a secure streaming deposit.
  • Escrow materials enter secure storage: Materials should enter secure physical storage. Ideally, they will be held within at least two secure physical sites.
    Depending on your package, they may enter production servers. Servers are ready to go live in the event that the SaaS vendor meets a trigger condition. Your escrow agency will ensure the materials are secure and remain unaltered until a triggering event occurs.  
  • SaaS vendors update escrow materials periodically: The escrow agency will typically handle any updates or revisions to the deposited materials as outlined in the agreement. A Test Plan Verification may be performed on a periodic basis (and with each SaaS application update). You may be able to set up automatic deposits for your escrow, eliminating the work required to ensure your materials are up to date.  

Data Release and Trigger Events

You won’t be expected to do anything else unless a trigger event occurs. Trigger events will be outlined in your escrow agreement.  

For SaaS vendors, trigger events might include: 

  • Bankruptcy  
  • Prolonged service disruptions 
  • Breach of the terms of service agreement  

If a trigger event does occur, the subscriber can make a claim to access the escrowed materials. The escrow agency is responsible for verifying the claim based on the terms of your agreement. The SaaS software vendor is welcome to contest the subscriber’s claim, but this may require litigation.  

If the claim is valid, the customer will be granted access to the source code, documentation, and other materials. This allows the subscribers to continue using the software themselves, find a new vendor to run it for them, or extract their data. Ultimately, they can continue mission-critical operations without loss of data.  

As a SaaS vendor, you can demonstrate confidence and build trust by entering into a SaaS software escrow agreement. EscrowTech offers customized agreements for SaaS vendors of all sizes and across a broad range of industries. Visit our SaaS escrow page to learn more about ensuring data security.

author avatar
Jorge Sagastume
Jorge Sagastume is a seasoned professional with over two decades of experience in the software escrow industry. As the President of EscrowTech International, Inc., he has demonstrated a profound expertise in navigating the complexities of software escrow agreements and intellectual property management. His leadership has been instrumental in solidifying EscrowTech's reputation as a trusted and reliable partner in the tech industry. Jorge's commitment to excellence and his passion for delivering top-notch service are reflected in the long-standing relationships he has built with clients and partners alike